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How to Choose a

Health Insurance for Self-Employed

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Finding the best health insurance plans for freelancers

The U.S. healthcare cost is one of the highest in the world, making health insurance something you can’t be without. The majority of U.S. citizens have health insurance for the same reason. Health insurance is a default for most W-2 employees, as employers usually adjust the insurance amount from salaries. But, when you’re a self-employed individual, sole proprietor, freelancer or independent 1099 contractor, you're the one taking care of your health insurance. So using a 1099 tax to find self-employment deductions, like certain healthcare expenses, can help keeps the bills low. And there’s an extensive list of insurance options and organizations you can choose for self-employed health insurance coverage. As a self-employed individual, you have to figure out on your own a health insurance that best suits your needs. There are many options and it's easy to get confused between the large lists of alternatives, policies and rules.

Table of contents

Key Takeaways:...Read more

Do I need health insurance as a self-employed individual?...Read more

How to choose self-employed health insurance?...Read more

What is the best health insurance for self-employed individuals?...Read more

Key Takeaways:

There are parameters to consider before choosing a health insurance provider
Benefits of health insurance can…

Do I need health insurance as a self-employed individual?

Yes, everyone needs health insurance and so do self-employed individuals. This is primarily because of the ever-rising medical costs in the U.S. As a self-employed individual, there are several benefits of health insurance, like:

A health insurance will cover all or part of your medical cost if you have a medical emergency. It's crucial to have it when the average medical bill for a day of hospitalization is upwards of $10,000.
You can have peace of mind as illnesses or accidents can send you into a major financial crisis because of your medical bills.
A health insurance premium can be used as a qualifying deductible from your taxable income.

Health insurance counts as an income adjustment and can significantly lower your taxable income. It also helps you avoid a higher tax bracket if you are barely making into a higher tax bracket. For instance, let’s say you made $85,000 of self-employment income last year, putting you just barely into the 22% tax bracket. During the year, you spent $7,500 on health insurance and went to school part-time. Being in school makes you potentially eligible for certain tax credits, depending on your taxable income. One huge one is the American Opportunity Tax Credit, available for the first four years of postsecondary school. This credit phases out at $80,000 for single taxpayers. Usually, you’d be out of luck. But subtracting $7,500 for your health insurance, your adjusted gross income becomes $77,500. That means you avoid the phaseout and unlock a $2,500 tax credit. As a result, you also safely avoid the 22% tax bracket. For this reason, most experts recommend that every professional, employee or self-employed individual have comprehensive health insurance. And while you are at it, it also covers all emergency and non-emergency medical costs.

Image with text "FLYFIN - Why is health insurance necessary? Medical emergency cover, peace of mind, tax deductible." Importance of health insurance for emergencies, peace of mind & tax benefits. Relevant for self-employed, 1099 & freelancers.

Quick tip

You should get a self employed health insurance after consideration of your health and financial status.

How to choose self-employed health insurance?

Image of FLYFIN with text highlighting parameters to choose for self-employed health insurance, convenience, insurance for underserved groups, network, and customer service.

Based on your priorities, individual status and needs, you have to select the right kind of insurance company. You can consider these four parameters and see which health insurance provider best suits your needs as a self-employed individual.

When there are multiple types and levels of health insurance, it becomes challenging to choose the right one. There are several parameters that you can consider when choosing the right self-employed insurance:

Convenience:

Check the ease of filing for a self-employed insurance claim in case of a health emergency. Many companies offer insurance, but only a handful can provide complete peace of mind. It’ll help if you look for an ideal health insurer that offers services like virtual care options or prescription home delivery. You can also check for one that offers these services across the U.S. and covers all the states where you operate as a self-employed individual. For instance, virtual care allows you to get an online consultation option and if you don’t have anybody to bring you medication. It's convenient to have it delivered to your doorsteps.

Network:

This area will give you an idea of the insurer's reach in consultants, clinics, hospitals and doctors. You must go for health insurance for self-employed individuals that brings you a whole bunch of medical services through a tightly knit network. Look out for health insurance with a large pool of healthcare providers, operations in all 50 states and self-employed individuals can also receive a free quotation. An insurer with a widespread network also has a positive impact on how quickly you can get approvals for generic and specific medications. It is also easier and faster to get approvals for MRI tests or maternity coverage. For example, suppose you are a cross-country semi-truck driver and work as a freelance delivery driver for a large online retailer like Amazon. In that case, it's wise to get valid medical insurance for all the states you travel to. Getting self-employed health insurance that covers all the states you travel to and might travel to in the future ensures that you don't have to worry about being on your own. In addition, if the health insurance provider also has an extensive network of hospitals, you have a high chance of having an affiliated provider nearby.

Insurance for underserved groups:

If you are a self-employed individual and belong to an underserved group, you should look for health insurance specific to that category. People in underserved groups have significantly less access to the healthcare system. For example, if you are a self-employed person on a government assistance program, you can opt for Medicaid or Medicare health insurance for self-employed people. However, you must have your application approved by the IRS. A Medicare tax calculator can help you know if you're eligible or not.

Customer service:

What is the best health insurance for self-employed individuals?

We must focus on the best health insurance for a self-employed individual. Based on your individual needs, you can choose the best health insurance from a long list of insurance providers like:

Image of FLYFIN with a list of popular insurance providers including United Healthcare, Humana, Kaiser Foundation, and Cigna. No mention of self-employment, 1099, freelancer, or taxes.

The best self-employed health insurance for the 2023 year from these providers varies from person to person and from profession to profession. Each of these insurance providers has pros and cons, which we will take up in a separate post. But, the important thing is to consider the kind of self-employed insurance you are looking for, which could be Medicaid, Medicare, long-term or short-term.

Adjusted Gross Income

A lot of terms get thrown around when it comes to the tax season and your adjusted gross income (AGI) is one of them.